BC Must Develop a Stronger Corporate Head Office Presence

- Jock Finlayson is executive vice-president of the Business Council of British Columbia, a non-partisan organization made up of 250 leading companies, post-secondary institutions and organizations from across the province’s diverse economy.

BC - Business analysts and economic development agencies understand that the presence of corporate head offices brings many benefits to cities and regions. The Metro Vancouver region needs to improve in this area.

Not only do large companies and fast-growing mid-sized firms directly support high-paying jobs, they also help to sustain employment in other local industries that sell goods and services to the head office sector – law and accounting firms; suppliers of financial, engineering, transportation and environmental services; and recruitment and public relations specialists.

Moreover, a solid foundation of head offices often leads to greater business support for local universities and colleges, cultural institutions and other philanthropic causes.

There are many reasons why policy-makers and other community leaders should seek to develop a robust head office cluster.

This is one area where Metro Vancouver has long been a mediocre performer. Over the last 25 years, the region has seen the disappearance of numerous large businesses due to consolidation in industries like mining and forestry, takeovers of BC firms that subsequently shed local jobs, and the occasional relocation of companies to other jurisdictions.

Fortunately, this has been offset to a significant extent by the growth of other BC enterprises, which have evolved from small businesses to much larger organizations.

But overall Greater Vancouver has struggled to expand the head office sector.

Statistics Canada’s annual Head Office Survey for 2015 counted corporate head offices and estimated direct head office jobs for each province and several major metropolitan areas. The survey covered public and private companies.

A head office is defined as an “establishment … primarily engaged in providing general management and/or administrative support services” to affiliated operations and lines of business owned by the company in question.

This definition captures B.C. companies that do significant business within the province (e.g., HSBC Bank Canada, Canfor, West Fraser, Teck, the Jim Pattison Group, Concert Properties and Telus), as well as firms headquartered here but whose main production facilities are located elsewhere (e.g., Methanex and Goldcorp).

Table 1 (download) shows the number of head offices and direct head office employment in the five biggest provinces for 2012 and 2015. Table 2 (download) does the same for major Canadian metro areas. A few points are worth noting:

Nationally, the number of large Canadian-headquartered firms has been fairly stable since 2012, while direct head office employment has risen modestly.

British Columbia ranks fourth among the provinces as a base for large companies, hosting 11.2 per cent of these Canadian firms in 2015. Little changed from 2012.

Among metro areas, Toronto and Montreal stand out for the size of their corporate sectors, together accounting for almost 40 per cent of Canadian head offices in 2015.

Another way to gauge the success of a city or a province as a location for corporate headquarters is to measure head office jobs relative to total employment. As Table 3 (download) shows, both British Columbia and Metro Vancouver punch below their weight in head office jobs, compared to other provinces and most competing Canadian metros. Alberta and Calgary perform exceptionally well in this area, reflecting the concentration of energy-related businesses in the province and the city.

All of this underscores the need for an increased focus by policy-makers in B.C. and Metro Vancouver on growing more locally-based companies and attracting firms from elsewhere.

Success in this domain would produce sizable economic dividends for the province and region.